Nicaragua: Country Financial Accountability Assessment

Abstract:

The overarching goal of this Country
Financial Accountability Assessment (CFAA) i s to assist the
Government in achieving effective implementation of its
strategy for strengthened growth and poverty reduction
through good public financial management. Some of the
report's general conclusions are as follows: The laws
and regulations governing public financial management are
generally sound, but need to be consolidated and modernized.
The Government has gradually improved budget classification,
realism and participation of executing entities in its
preparation. Still, there is budget incrementalism and an
effective separation of recurrent and investment budgeting.
The Government's integrated financial management system
has considerably improved public financial management,
establishing the concept of increased efficiency through
integration of budgeting, accounting, treasury, public debt
and procurement. Operation of the treasury single account
system has contributed significantly to effective cash
position controls, but absence of detailed cash flow
programs and presence of global budget transfers prevents
adequate cash management. While the integrated financial
management system has allowed for effective central controls
on overall spending, the internal control and internal audit
capacity in spending entities needs improvement. The
underlying financial management systems still do not
contribute to increased efficiency of service delivery.
Public investment planning capacity has increased, but
deficient monitoring and evaluation systems help perpetuate
the existence of obsolete and ineffective programs. Although
budget execution reports are prepared on time, the lack of
adequate government financial statements and
institutionalized public sector accounting affects the
review and analysis of public finances. The lack of external
audit reports on government financial statements is a
serious obstacle to transparency in public finances. The
institutional foundations to allow for public scrutiny of
public expenditure are already in place, but effective
implementation requires dealing with significant challenges
posed by the lack of traditions of public consultation and
of meaningful public access to information, the abstract and
complicated nature of available information on public
finances, and the physical difficulty of accessing the
information. Other conclusions concerned external aid
channeling practices, civil service reform, public debt
management, and generally weak revenue administration.